Santander revises its buy to let affordability assessment

Santander is to increase its buy to let rental cover requirement from 125% to 145% and is removing its tiered buy to let affordability rates that are based on loan-to-value (LTV), replacing them with a single affordability rate.

The lender plans to introduce the changes from Wednesday 23rd November, from which date it will use a single affordability rate of 5.5% for deals up to and including 75% LTV.

While Santander already stress tests at 5.5% on buy to let mortgages above 60% LTV, the rate will now apply to mortgages below 60% LTV as well.

A spokeswomen for the lender said that these changes are being implemented to reflect upcoming changes in taxation.

“Following the PRA supervisory statement on underwriting standards for buy to let (BTL) properties, we have made a change to the way we assess affordability on BTL mortgages.”

The lender is not making changes to the way they assess background properties on residential applications that are currently let or will be let. Calculations will remain at 125% rental cover at 5.00% up to and including 60% LTV, or 5.50% above 60% LTV.

Santander’s affordability calculator confirms whether it should take into account any income or any costs from these properties in its affordability calculation.

This new revision to its buy to let affordability assessments is the second Santander has made this year. In February, a two-tiered approach for deals at and above 60% LTV was introduced by the lender.

All complete mortgage applications submitted via Santander’s introducer network by Tuesday 22 November will be unaffected by the changes.

However, as from Wednesday 23 November, the lender’s criteria and affordability calculator for buy-to-let customers will be updated to reflect the changes and cases submitted from this day onwards will be assessed via the new criteria.

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